Question
On September 30, 2015, Ericson Company negotiated a two-year, 2,200,000 dudek loan from a foreign bank at an interest rate of 4 percent per year.
| On September 30, 2015, Ericson Company negotiated a two-year, 2,200,000 dudek loan from a foreign bank at an interest rate of 4 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2017. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end. |
| September 30, 2015 | $ | 0.110 | |
| December 31, 2015 | 0.115 | ||
| September 30, 2016 | 0.130 | ||
| December 31, 2016 | 0.135 | ||
| September 30, 2017 | 0.160 | ||
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| |||
| a. | Prepare all journal entries related to this foreign currency borrowing assuming the above exchange rates for 1 dudek. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
| b. | Determine the effective cost of borrowing in dollars in each of the three years 2015, 2016, and 2017. (Do not round intermediate calculations.) |
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Horngrens Financial and Managerial Accounting
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
5th edition
9780133851281, 013385129x, 9780134077321, 133866297, 133851281, 9780133851298, 134077326, 978-0133866292
